Why are tenant-caused claims still hitting my loss runs?

Side view of two people siting next to each other at a desk. There is a laptop in front of each person, and a stack of papers between this. The only part of the people that is visible is their hands, one of which is writing something on the stack of papers.

One of the most significant issues real estate owners and operators solve is reducing the impact of tenant-caused risk. Successfully managing single- and multi-family portfolios of size requires continual vigilance and full visibility across the entire portfolio.

Despite best efforts to minimize risk, tenant-caused claims will always appear on loss run reports, impact aggregate retentions, erode deductibles, and have a lasting impact of five years or more. This is due to three main factors:

  • Compliance Gap
  • Care, Custody, and Control
  • Negligence Difficult to Prove

A loss run report is required when providing a submission for insurance. During the underwriting process, claims history is one of the most significant factors looked at, and if there are multiple claims, the premium will be much higher. For a ten thousand unit portfolio, 31% of uninsured residents becomes $500,000 to $1,250,000 in increased premium over five years.

The focus of this read is on how to minimize the impact and frequency of tenant-caused risk that directly impacts loss runs and premiums.

1. Compliance Gap

88% of apartment management companies require insurance. Despite this requirement, 31% of all tenants at institutionally-managed properties remain uninsured.*

This lease noncompliance is due to a number of factors, most notably policy cancellations, bad data, and fraud. Read Why 31% of Renters are Uninsured for more information on renters insurance lease noncompliance.

2. Care, Custody and Control

Found in commercial liability insurance policies, a care, custody, and control exclusion removes coverage for someone else’s property that is damaged while in your possession. Rented property is often left uncovered by care, custody, or control exclusions.

Property coverage that falls under a care, custody, and control exclusion varies, making it hard to guarantee. When a claim is filed, courts review the case to decide if the exclusion should be upheld or denied.

3. Negligence is Difficult to Prove

Sometimes the only way to resolve a conflict between property owner and resident is in court. It can be extremely difficult to hold someone financially responsible for a problem they could have prevented, and negligence laws are often unclear.

Negligence is defined as a failure to take proper care when doing something, or the failure to exercise the degree of care that a reasonable person would exercise under the same circumstances. Negligence claims must prove one of four things; breach, causation, duty, or damages. Without possessing solid evidence, how do you prove a case?

Of course, insurance inspectors are trained to evaluate this type of damage correctly, but proving negligence can be nearly impossible depending on the situation.

Loss Runs

In the same way credit scores allow banks to determine good candidates for bank loans or credit cards, loss runs enable insurers to assess how risky your portfolio will be to insure.

By requesting your loss runs, an insurer can review:

  • Past claims filed
  • The financial impact of filed claims
  • The frequency of prior claims

A loss run report is required during both the application and renewal process. When the new insurance application is going through underwriting, claims history is one of the biggest factors looked at to determine coverage and rates.

If you have multiple claims, your premium will be much higher. This is less than ideal in the current hard market, where insurance is in high demand and low supply.

During a hard market, stringent underwriting is strictly adhered to, premiums remain high, and only a limited number of policies are written. Insurers are not likely to negotiate terms, so if your loss run report has a colorful history, you are not likely to get a good deal.


A loss history can have an impact on your portfolio’s overall insurance rates and profitability potential for years. A sound resident risk management strategy is the best course of action to maximize profitability, and it doesn’t have to be difficult. Establishing a compliance team that is trained in insurance processing is the best way to manage this risk and avoid excessive claims submissions.

31% of uninsured tenants in a 10,000 unit portfolio equals $500,000 to $1,250,000 in increased premium over a period of 5 years. Property managers should never handle certificates of insurance unless they possess the correct training. Implementing an experienced compliance team at scale can help save your company hundreds of thousands of dollars in the long run, while maintaining good rates and producing loss-run reports that are viewed favorably during the application and renewal process.